Buying property has never been so popular – but landlords have been advised about changes that could impact on their investment.
RNS partner Rebecca Abbott said questions are asked on a weekly basis following HMRC’s changes.
She has summarised what can and cannot be claimed for against property income.
Relief for repairs is still available for furnished, part-furnished and unfurnished properties.
Replacing or repairing integral items to the property, such as integrated fridges, freezers, dishwashers, cookers and hobs are allowable deductions.
However, items replaced or repaired which are not part of the entirety of the property, such as free-standing fridges and freezers or carpets, will not be allowable.
Prior to 6th April, 2013, the landlord of a furnished property had a choice when they came to replace items in a rented property. They could claim either the renewals basis or the wear and tear allowance.
The landlord of an unfurnished or partly furnished rental property could only claim the renewals basis.
From April 2013, the extra-statutory concession for the renewals allowance has been withdrawn. This allowed for the replacement of most items used in furnished and unfurnished properties.
Relief for renewals is now limited to items that are of a relatively low value and have a short economic life, for example, rugs, crockery, toasters, glassware and soft furnishings.
These items will need replacing nearly every year or so due to wear and tear. Any items that are of a higher value and do not need replacing as regularly, for example carpets and curtains, would be regarded as capital items, and so there is no allowance for their replacement.
Relief for the 10% wear and tear allowance is still available for fully furnished properties.
This relief is a regular allowance against property income, calculated as a percentage of the rent received less any utilities paid.
This relief is to cover expenditure incurred on the repair and renewal of items and is therefore instead of claiming for any repairs or renewals individually.
A landlord may therefore wish to consider fully furnishing a property to enable you to claim this allowance.
Overview of allowable costs against property income
- Letting agent fees
- Mortgage interest
- Repairs to integral items within the property
- Accountancy fees relating to rental accounts
- Mileage to and from property
- Advertising
- Fees for loan finance
- Services paid for on behalf of tenants (e.g. council tax and utilities)
- Gardening, window cleaners, cleaners and security costs
- Renewals of items with low value and short economic life, only if not claiming the wear and tear allowance.
- Wear and tear allowance, for furnished properties only
Any questions, please contact your usual RNS partner or Rebecca Abbott (01652 655111), rja@rnsca.co.uk